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Construction Momentum Builds Behind Nonresidential Starts

Jim West/Alamy Stock Photo Construction of the freeway interchange for the Gordie Howe International Bridge. Scheduled for completion in 2024, the bridge will link Detroit with Windsor, Ontario across the Detroit River.
Commercial and other nonresidential starts are giving a much-needed boost to the overall construction industry, recent reports show.

Several recent reports harbor some good news for the construction industry as nonresidential construction starts give the industry a welcomed injection of activity.

The trend of increased non-residential construction starts, and its ripple effects on the construction equipment market at large, showed up in the latest reports from Dodge Construction Network and EquipmentWatch.

“According to the Dodge Index, nonresidential building starts increased 51% (in December), and nonbuilding starts increased 30% in December,” the latest monthly report from EquipmentWatch stated.

Dodge Construction Network predicts that, while the economy should soften in 2023, major utility, infrastructure and manufacturing projects “are driving positive momentum.”

In preparation for those projects, EquipmentWatch’s February report said owners are likely offloading equipment that is older and has higher usage.

While economic forecasts, like one from the Portland Cement Association in January, have forecasted that 2023 will yield a reduced cement demand for the first time in 13 years, EquipmentWatch’s latest monthly report points to increased nonresidential building project starts that closed out 2022.

Dodge Data and Analytics reported that construction starts gained across all sectors in 2022, with highway and bridge starts rising 25%.

“One of the key construction storylines for 2022 was the return of enthusiasm and optimism in prospects for nonresidential growth,” said Richard Branch, chief economist for Dodge Construction Network, in a release published on its website. “While some of that will likely erode in 2023 as economic growth wanes, increased demand for some building types like data centers, labs and healthcare buildings will provide a solid floor for the construction sector.”

More good news

EquipmentWatch’s latest monthly report revealed that activity on construction equipment resale channels was also up to close out 2022.

“The likely drivers for the increased activity were a dramatic spike in construction starts in December, and anticipation of strong activity in the manufacturing and infrastructure sectors,” the report stated.

Fair market value for construction equipment has continued to decline, although it has remained flat year over year, while activity in equipment auction channels shows increased activity, according to EquipmentWatch.

Year-over-year, equipment age was up by 4.5% and usage was up 9% to close out 2022 in the resale channels. Average age and usage were also up month-over-month, rising by 5.7% and 2.1%, respectively, the report said.

The picture, however, was different when looking at recent trends in the auction channel.

“In a departure from the resale channel, average age and usage of the equipment on the auction channel were down compared to December 2021, dropping by 8.0% and 9.1%, respectively,” the report said.

TAGS: commercial
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